Following Jerome Powell’s speech on Friday, the cryptocurrency market returned to positive territory, with values such as ETH rising by more than 10%. What did the Federal Reserve (Fed) chairman say?
Jerome Powell’s comments reassure the crypto market
On Friday at 4 p.m. Paris time, Jerome Powell gave a speech at the traditional Jackson Hole economic symposium, an annual event that brings together central bankers from around the world. In parallel with this speech, the crypto market rebounded, particularly for assets such as ETH, which traded up 10.9% over 24 hours. At its peak, the price of ETH rose by nearly 14% and now stands at $4,740:
Beyond ETH, it should be noted that BTC has regained $115,000, and SOL has risen above $200, up more than 13%:
In concrete terms, it should first be noted that Jerome Powell made no mention of cryptocurrencies in his speech. Nevertheless, the market seems to have anticipated a potential future rate cut by reading between the lines. One of the points that leads investors to believe this is a certain concern about the job market:
Overall, while the labor market appears to be balanced, it is a strange balance resulting from a marked slowdown in both labor supply and demand. This unusual situation suggests that the risks of a deterioration in employment are increasing. And if these risks materialize, they could do so quickly, in the form of a sharp increase in layoffs and rising unemployment.
In the event of a sharp rise in unemployment, central bankers may indeed be tempted to lower key interest rates in order to boost growth.
While the Federal Reserve (Fed) rates are currently set at 4.5%, the forward-looking data available on the CME Group website gives a 75% probability of a cut to a range between 4% and 4.25%, and a 25% probability of maintaining the status quo.
However, other factors could also sway the Fed’s decision in favor of maintaining current rates. For example, the tariff increases initiated by Donald Trump could contribute to sustaining inflation:
The important question for monetary policy is whether these price increases are likely to significantly increase the risk of persistent inflation.
While workers may demand compensation for price increases in the form of wage increases, the Fed chairman downplays this scenario given the current state of the labor market.
We will have to wait until September 17 to find out the Fed’s next decision. In the meantime, the crypto market has taken a positive tone from this speech and is now up 4.1% over 24 hours, with a market capitalization of $4.085 trillion.
